Friday, February 16, 2018

Comments on January Housing Starts

by Bill McBride on 2/16/2018 10:50:00 AM

Earlier: Housing Starts increased to 1.326 Million Annual Rate in January

The housing starts report released this morning showed starts were up 9.7% in January compared to December, and starts were up 7.3% year-over-year compared to January 2017.  

This first graph shows the month to month comparison between 2017 (blue) and 2017 (red).

Starts Housing 2016 and 2017Click on graph for larger image.

Starts were up 7.3% in January compared to January 2017.

Total starts are up 18.1% compared to January 2016 (two years ago).  That is solid growth.

Single family starts were up 7.6% year-over-year, and up 3.6% compared to December.

Multi-family starts were up 6.7% year-over-year, and up 23.7% compared to December (multi-family is volatile month-to-month).

Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

Multifamily Starts and completionsThe blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) increased steadily over the last few years - but has turned down recently.  Completions (red line) have lagged behind - and completions have caught up to starts (more deliveries). 

Completions lag starts by about 12 months, so completions will probably turn down in a year or so.

As I've been noting for a couple of years, the growth in multi-family starts is behind us - multi-family starts peaked in June 2015 (at 510 thousand SAAR).

Single family Starts and completionsThe second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Note the low level of single family starts and completions.  The "wide bottom" was what I was forecasting following the recession, and now I expect a few more years of increasing single family starts and completions.